Abstract
We examine the effects of the short-selling ban, imposed by Australian regulators in the wake of the global financial crisis, on the trading of financial stocks. Our findings argue against commonly stated reasons for imposing short-sale bans. We find no evidence that short-sale restrictions provide support for stock prices or that they reduce volatility. Moreover, stocks subject to the short-selling ban suffered a severe degradation in market quality. Controlling for the adverse effects of the financial crisis on markets, we show that short-selling restrictions increase intraday volatility, reduce trading activity and increase bid-ask spreads.
| Original language | English |
|---|---|
| Pages (from-to) | 727-757 |
| Number of pages | 31 |
| Journal | Accounting and Finance |
| Volume | 57 |
| Issue number | 3 |
| Early online date | 30 Mar 2016 |
| DOIs | |
| Publication status | Published - Sep 2017 |
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Effect of the ban on short selling on market prices and volatility. / Helmes, Uwe; Henker, Julia; Henker, Thomas.
In: Accounting and Finance, Vol. 57, No. 3, 09.2017, p. 727-757.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Effect of the ban on short selling on market prices and volatility
AU - Helmes, Uwe
AU - Henker, Julia
AU - Henker, Thomas
PY - 2017/9
Y1 - 2017/9
N2 - We examine the effects of the short-selling ban, imposed by Australian regulators in the wake of the global financial crisis, on the trading of financial stocks. Our findings argue against commonly stated reasons for imposing short-sale bans. We find no evidence that short-sale restrictions provide support for stock prices or that they reduce volatility. Moreover, stocks subject to the short-selling ban suffered a severe degradation in market quality. Controlling for the adverse effects of the financial crisis on markets, we show that short-selling restrictions increase intraday volatility, reduce trading activity and increase bid-ask spreads.
AB - We examine the effects of the short-selling ban, imposed by Australian regulators in the wake of the global financial crisis, on the trading of financial stocks. Our findings argue against commonly stated reasons for imposing short-sale bans. We find no evidence that short-sale restrictions provide support for stock prices or that they reduce volatility. Moreover, stocks subject to the short-selling ban suffered a severe degradation in market quality. Controlling for the adverse effects of the financial crisis on markets, we show that short-selling restrictions increase intraday volatility, reduce trading activity and increase bid-ask spreads.
UR - http://www.scopus.com/inward/record.url?scp=84963657074&partnerID=8YFLogxK
U2 - 10.1111/acfi.12211
DO - 10.1111/acfi.12211
M3 - Article
VL - 57
SP - 727
EP - 757
JO - Accounting and Finance (ONLINE)
JF - Accounting and Finance (ONLINE)
SN - 0810-5391
IS - 3
ER -